China punishes North Korea as US asks for more

FILE - In this Dec. 8, 2012 file photo, Chinese paramilitary policemen build a fence near a concrete marker depicting the North Korean and Chinese national flags with the words "China North Korea Border" at a crossing in the Chinese border town of Tumen in eastern China's Jilin province. China is trying to punish ally North Korea for its nuclear and missile tests, stepping up inspections of North Korean-bound cargo in a calibrated effort to send a message of Chinese pique without further provoki
— AP

FILE - In this Dec. 8, 2012 file photo, Chinese paramilitary policemen build a fence near a concrete marker depicting the North Korean and Chinese national flags with the words "China North Korea Border" at a crossing in the Chinese border town of Tumen in eastern China's Jilin province. China is trying to punish ally North Korea for its nuclear and missile tests, stepping up inspections of North Korean-bound cargo in a calibrated effort to send a message of Chinese pique without further provoki
/ AP

Over the past decade, as previous nuclear and long-range missile tests and other provocations saw the UN, the U.S., South Korea and Japan impose sanctions and reduce trade and assistance to North Korea, China has stepped into the breach. By 2011, China provided nearly all of North Korea's fuel and more than 83 percent of its imports, everything from heavy machinery to grain and electronics and other consumer goods, according to statistics from the International Trade Center, a research arm of the United Nations and World Trade Organization.

Though Pyongyang could look to other trading partners like Russia, Iran or Kuwait for fuel and some other goods, China's proximity - their shared 1,400-kilometer (880-mile) border - makes it indispensable. Chinese companies, often with backed by the government, are enlarging North Korean ports and building roads, helping to underpin growth after more than a decade of famine and economic decay.

Such was the Chinese support that U.S. politicians and UN experts complained that Beijing was failing to enforce previous rounds of sanctions, particularly on luxury goods. The $169,000 worth of pleasure boats imported by North Korea last year all came from China, the ITC data show, as did most of the liquor and cigarettes.

As China upped its investment, it became disillusioned with Kim Jong Un. Since coming to power after the sudden death of his dictator father, Kim has refused to heed Beijing's prodding to engage in economic reform and return to negotiations over its nuclear program.

Beijing's unhappiness began to show in December, around the time of North Korea's latest long-range rocket launch but before the nuclear test. It was then, traders and cargo companies said, that orders for tightened inspections appeared.

At Complant International Transportation in the port of Dalian, customs inspectors began opening containers and packages with equipment or luxury goods or anything they deemed sensitive rather than just scan them, said a company executive who identified himself only by his surname, Zhang.

"That was since the end of last year. Now they're even stricter," Zhang said.

Companies in the border city of Dandong on the Yalu River said North Korean-bound goods have to be stored in bonded logistics centers for inspection by customs authorities. Banking restrictions mean North Korean traders have a hard time getting hard currency.

"Due to the lack of cash, North Korean companies tend to pay with minerals or coal, but we only trade with those able to pay in cash," said Yu Tao, vice general manager of the Dandong Import and Export Co. Yu said the company trades daily consumer goods and has been reducing its trade with North Korea because of the risks.

Banking is one area where China has been tightening controls, but the U.S. would like Beijing to do more. "China remains the name of the game when it comes to financial sanctions against North Korea," said Jo Dong-ho, an expert on the North Korean economy at Seoul's Ewha Womans University.

In late 2011, Beijing forced the China Construction Bank to close accounts opened by the Korea Kwangson Banking Corp. in Dandong and the Golden Triangle Bank in Hunchun, another border city, to comply with previous U.N. sanctions. Still, with tens of thousands of North Koreans having fled to China, many just for short-term work, plus traders, the yuan is used inside North Korea, and smuggling of large amounts of the Chinese currency across the border has become common.